Singapore Start-up Forum [SSuF] -- Connecting Entrepreneurs

Welcome Entrepreneurs of Singapore. Have questions about starting a business? Looking for a business partner or a Mentor? You've come to the right place.
 
HomeHome  FAQFAQ  SearchSearch  RegisterRegister  Log inLog in  


Bookmark and Share
 

Borrowing money from relatives as start-up capital

View previous topic View next topic Go down 
Author Message
LLY



Posts : 3
Reputation : 0
Join date : 2010-06-14

PostSubject: Borrowing money from relatives as start-up capital   Mon Jun 14, 2010 7:37 pm

Dear experienced entrepreneurs,

I am planning to start up a new business. My relatives have agreed to become my creditor. I will be registering a private limited company. They have agreed to become creditors to the company.

May I know if there are any regulations on this matter to watch out regarding relatives becoming creditors to start-up companies? Like maximum interest rate that can be charged or principal that can be loaned? Is there some template that I can use for this loan contract?

Thank you very much in advance.
Back to top Go down
inle
Rising Star
Rising Star


Posts : 171
Reputation : 6
Join date : 2009-06-29

PostSubject: Re: Borrowing money from relatives as start-up capital   Thu Jun 17, 2010 3:06 pm

Here's how you can do it....

Before we go on, I like to say that there is no "standard format or template" for relatives' loans for your start up business....
It's Entirely up to you, LLY....

At the same time, if you like to decide on the principal, interest rates and other related details, you might like to consider these:

- How much do you need? And for what purposes?
This will let you know where the money will go to and for what purposes to run your business....
You might like to look at 3 specific areas to allocate your fundings: the operations needs, the marketing needs, and the administration needs.....

- How long do you need?
This will let you decide when will be the time you exhaust the capital injection on what business activities....
This will also determine how soon you will need to return the loan to them....

- What's the returns of your business with the loan at a specific time horizon?
You will know how much and at which period of time you can return with interests to your relatives....
From there, you will know your net returns of your business and how "profitable" is your business from that injection....
It will be great if you can project a sales and profits forecast to facilitate this....

Hope it can help you ya...
Please let us know if we can support you further, LLY....

PS:
Have you consider getting government grants too?
Back to top Go down
LLY



Posts : 3
Reputation : 0
Join date : 2010-06-14

PostSubject: Re: Borrowing money from relatives as start-up capital   Thu Jun 17, 2010 3:30 pm

Thank you very much for your detailed reply.

I have never considered government grants because I never thought strangers would be willing to help a start-up with little to offer except risks:)
Only relatives are willing to help in such a situation. Nevertheless, are there websites that I can refer to for government grants?
Back to top Go down
LLY



Posts : 3
Reputation : 0
Join date : 2010-06-14

PostSubject: Re: Borrowing money from relatives as start-up capital   Thu Jun 17, 2010 3:38 pm

I am also considering getting loans from the bank because I cannot bring myself to ask for low interest rates from my relatives anyway. Regarding bank borrowings ... What happens if my company goes bankrupt? Who gets the first claim? My relatives or the bank? My preference is to pay back my relatives first among all the creditors. Do I have the legal right to choose who to pay back first?

It will be a nightmare to lose both money and family.
Back to top Go down
SSuF Admin
Admin
avatar

Posts : 352
Reputation : 5
Join date : 2009-02-26
Location : SG, Bishan

PostSubject: Re: Borrowing money from relatives as start-up capital   Sun Jun 20, 2010 2:01 am

Hi LLY,

Starting a business is a really big question mark. Plus a lot of small ones here and there too.

To build on what inle said, regardless of whether you are borrowing from the bank or relatives, please get the loan written down.

Especially in the case of borrowing from relatives. It would be best to get the terms of your loan in black and white. This will help you and your relatives have a clear picture of what you all are committing to.

In the unfortunate event of losses or bankruptcy, you all will know how to tell the difference between the finances from your family ties. Thus preventing unproductive arguments.

In the event of profit, it will also help as you all know what is your "fair share" of the profits.

Without a proper statement for the loan, many things become grayed-out or forgotten. This will get in the way of efficiency in your business operations.

A loan statement can be a simple typed out document that states all the conditions of the loan (amount, time, interest rate, etc.), and signed by the respective parties.


Also to help you out, I will PM you my personal contact in Spring Singapore. Spring is the government agency in charge of government grants to SMEs. She should be able to answer some of your questions.
_________________
Its Forum Creator here! afro

Hope you all enjoy the forum! Let's learn, contribute and grow, SG entrepreneurs.
Back to top Go down
http://www.ssuf.biz
inle
Rising Star
Rising Star


Posts : 171
Reputation : 6
Join date : 2009-06-29

PostSubject: Re: Borrowing money from relatives as start-up capital   Mon Jun 21, 2010 1:04 pm

Hi LLY,

Thank you for getting back to me....

I'm unsure what business you are working on, but strangers (like investors, angels, VCs) are always looking for profitable businesses to invest in....
That, of course, depends on how you can project your returns and figures within a time frame for your business, at calculated and controlled risk....
If you are confident and serious about your business and need someone to evaluate and invest in your business, let me know and we can look at it together....

If I remembered correctly (please correct me if I'm mistaken), you can only ask for bank loans if your business is at least 18 months in operations....
So loaning from banks is likely to be out of question for you....

As for grants, I could refer you to a grant consultant who deals with all the grants from all government agencies (one of them, of course, includes SPRING).....
Back to top Go down
Sponsored content




PostSubject: Re: Borrowing money from relatives as start-up capital   

Back to top Go down

Borrowing money from relatives as start-up capital

View previous topic View next topic Back to top 
Page 1 of 1

Permissions in this forum: You cannot reply to topics in this forum
Singapore Start-up Forum [SSuF] -- Connecting Entrepreneurs :: General Business :: Looking for Capital, Business Partners, or Mentors -